Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

If you want to know how the oil industry is faring after the crash in petroleum prices, one of the best place to go for answers is the quarterly conference call from National Oilwell Varco (NYSE:NOV). The drilling equipment manufacturer recently offered four important insights into the state of the industry and how it is dealing with the oil crash.

The quotes below are all from President and CEO Clay Williams.

Oil crash having unprecedented effect on North American rig counts

In the first quarter, with global supplies outpacing global demand by 1.5 million barrels per day, the oil price signal rolled through our industry like thunder and thunderstruck participants responded vigorously. ... Spending is falling in almost all regions, driving the worldwide rig count down by a third since September.The rate of decline of active rigs across North America is breathtaking and unequaled in prior downturns ... our revenue declined 16% in Q1, and is expected to decline further for at least in the next few quarters.

The unprecedented collapse in rig count -- down 52% in the past year -- is likely to continue for a few more months.

There is some cause for optimism that the worst might soon be over, as low-cost producers such as EOG Resources have said they will consider restarting drilling when the price of oil hits $65 per barrel -- as of May 13, West Texas Intermediate crude was around $61 per barrel -- and Pioneer Natural Resources might resume drilling as early as July.

Then again, oil prices -- which have rallied 42% since late March -- are notoriously volatile and may yet collapse again.

Can't predict the oil recovery

We don't know if we are in for a V-shaped, or a U-shaped, or a W-shaped recovery, but we will all know soon, because the industry is conducting its first grand global empirical test of price elasticity of the supply of oil. What we do know is that North American oil shales are emerging as the new swing source of oil. Since 2011, in a $100-per-barrel price environment, North American oil shales grew about 4.5 million barrels per day, while the rest of the world posted a 0.5 million barrel per day production decline.

Oil producers in the United States have proved to be an unstoppable, yet uncontrollable, force in world oil markets. That's because, unlike in major OPEC nations such as Saudi Arabia -- where there is just one state-owned oil company with its hand on the production taps -- U.S. shale oil production is derived from hundreds of companies. Each one makes its own decision on whether to drill, guided only by the invisible hand of the market and its own cash flow requirements.

U.S. production will fall off rapidly

We know individual shale wells decline exceedingly quickly, eight to 10 times the rate of conventional resources. We know that the sharp and rapid decline in the addition of fresh and new producing wells of all kinds will result in diminished global oil production over time. We also know that the excess productive capacity around the world, the oversupply, is, thankfully, just a few percent, far less than my first downturn in the 1980s. We also know that global economic activity, which drives oil demand, is not strong, and that lower oil prices will act as an economic stimulus to many economies.

Because shale-oil wells suffer such severe first-year declines in production it shouldn't take long for the large drop in rig counts and new well completions to affect U.S. production. In fact, according to the International Energy Agency, domestic oil production peaked in February and is now in decline.

However, before you break out the party hats and declare the oil crash over, be aware that global crude supplies in April hit a record 95.7 million barrels per day -- an increase of 3.2 million barrels per day compared to April of 2014. The increase occurred because everyone from OPEC nations to Russia is racing to increase production in order to capture market share from U.S. shale producers.

Services providers must act now despite uncertainty

2015 will be a year for restructuring at NOV. Given our short-term lack of visibility into the timing of the recovery, our approach will be to focus on costs, without sacrificing our long-term opportunities.

Specifically, the company will focus on early retirement, along with reducing contracted labor, overtime, and the number of shifts, as immediate cost-saving measures.

The takeaway: Oil prices are unpredictable, but oil services companies will pull throughThe oil industry has been around for 150 years and endured dozens of price crashes. Despite the severity of this downturn on the oil services industry, companies such as National Oilwell Varco are well prepared to survive and come out the other side more profitable then ever. Long-term investors would do well to load up on cheap shares now and patiently wait for the inevitable oil recovery.

Author

Adam Galas is an energy writer for The Motley Fool and a retired Army Medical Services Officer. After serving his country in the global war on terror, he has come home to serve investors by teaching them how to invest better in order to achieve their financial dreams.
Follow @adamgalas1